Benefits of government fuel price reporting schemes appear marginal

Benefits of government fuel price reporting schemes appear marginal

The Northern Territory Government recently passed legislation that will shortly see the establishment of a fuel price reporting scheme developed along similar lines to the NSW Fuel Check Initiative.

To be known as MyFuelNT, the new legislation will require all fuel retailers to post every fuel price change to a government website within minutes of changing the price boards at their sites.

It is understood that the design of the scheme will be largely modelled on the NSW Fuel Check Initiative and the NT Government is understood to be working with the NSW Government to secure rights to the necessary software.

At face value, this would appear to be a good thing for NT motorists and taxpayers. The legislation will result in the provision of information on near real-time petrol prices that can be readily accessed by motorists to determine the best petrol prices in their local area.

Further, the scheme appears to have been developed in response to a key finding of the ACCC’s 2015 Darwin Petrol Price Study which stated that increased transparency of petrol prices will likely drive increased competition and result in lower petrol prices for NT motorists.

“ACAPMA has a strong policy of supporting fuel price transparency as we believe it is an essential requirement for the operation of an open and competitive market – that is, one that is free of fuel price regulations such as those operating in some Asian countries”, said ACAPMA CEO Mark McKenzie.

But, can you have too much fuel price transparency?

Can you get to a point when there are so many schemes available that few people are using them?

More importantly, is it possible that compulsory fuel price reporting schemes developed by governments are placing upward pressure on fuel prices and consuming scarce government funds without adding any real value to fuel price transparency?

My FuelNT is a case in point.

This legislation was only recently passed by the NT Government – 18 months after the release of an ACCC investigation calling for increased price transparency in the Darwin market.

The move appears to ignore the fact that shortly after the release of the ACCC’s study in November 2015, the fuel industry responded with two national fuel price reporting initiatives.

In March 2016, GasBuddy launched its mobile app into the Australian market. This service builds on the successful USA model that encourages motorists to regularly report petrol prices in return for chances to win prices such as free fuel.

This development was followed by the launch of a revamped petrol price reporting application by MotorMouth in May 2016. Like GasBuddy, this application provides comprehensive information on fuel prices to Australian motorists.

While GasBuddy and MotorMouth are two of the most used industry models, there are other commercial applications such as Petrol Spy and Compare the Market that provide consumer information about petrol prices.

All the above schemes were in place prior to the NSW Government introducing NSW Fuel Check – a compulsory fuel price reporting scheme that then provides aggregated pricing information to third parties such as NRMA for dissemination to the market.

“This scheme effectively utilises taxpayer funds to operate a compulsory reporting scheme that duplicates the comprehensive industry schemes that were already in place”, said Mark.

“The advocates of compulsory price reporting schemes will point to the fact that, unlike the existing commercial applications, these schemes provide all petrol prices on a real-time basis to motorists”, said Mark.

“There are, however, two problems with this argument”, said Mark.

First, as openly acknowledged by NSW Fair Trading, the Government acknowledges that it is not possible to provide fuel prices for all fuel sites.

In short, the Government has not provided any additional resources to enforce the new laws which mean that there are still issues with the completeness and quality of the data sets being promoted as real-time petrol prices.

Secondly, the consumer usage of this information appears to pale in comparison with the usage of the commercial systems that are available.

Surely if the government is spending scarce taxpayer funds to duplicate existing industry information schemes then the action should be warranted by increased usage.

“Almost 12 months after the introduction of the NSW scheme, it appears that fuel price downloads of Fuel Check information are several magnitudes lower than other industry based schemes that come at no cost to taxpayers or motorists”, said Mark.

So what could possibly be the motivation of State/Territory Governments for introducing compulsory fuel price reporting schemes that offer marginal (if any benefit) in terms of improving price transparency?

Political gain? Surely not!

The real risk, given that these government schemes introduce compliance costs for industry, is that they potentially place upward pressure on petrol prices without delivering any real increase in transparency of fuel prices.

Such an assessment begs the question of whether it is possible to have too much price transparency?